Summary
McKesson Corporation's Form 10-Q for the period ending September 29, 2018, reveals a modest increase in revenue for both the quarter and year-to-date periods, driven by market growth, acquisitions, and new product launches, though partially offset by customer losses and challenges in certain European markets. The company's net income attributable to McKesson Corporation saw a significant increase, largely due to a substantial one-time credit from the renegotiation of a tax receivable agreement and a decrease in goodwill impairment charges compared to the prior year's comparable period. Operationally, the company is navigating a complex environment, including ongoing opioid litigation and government reimbursement changes, particularly in the UK. Significant goodwill impairment charges were recognized in prior periods, but the current quarter shows a substantial reduction in these charges, contributing to improved profitability. The company continues to execute strategic initiatives, including restructuring to optimize its operating model and cost structure, with expected charges to be incurred throughout 2019.
Financial Highlights
50 data points| Revenue | $53.08B |
| Cost of Revenue | $50.27B |
| Gross Profit | $2.80B |
| Operating Expenses | $2.12B |
| Operating Income | $689.00M |
| Net Income | $499.00M |
| EPS (Basic) | $2.52 |
| EPS (Diluted) | $2.51 |
| Shares Outstanding (Basic) | 198.00M |
| Shares Outstanding (Diluted) | 199.00M |
Key Highlights
- 1Revenues increased by 2% year-over-year for both the quarter and the six-month period, reaching $53.1 billion and $105.7 billion, respectively.
- 2Net income attributable to McKesson Corporation significantly increased to $499 million ($2.51 diluted EPS) for the quarter, compared to $1 million ($0.01 diluted EPS) in the prior year's quarter, largely driven by a $90 million pre-tax credit from a Tax Receivable Agreement renegotiation and reduced impairment charges.
- 3Gross profit margin saw a slight decrease in the quarter but improved year-to-date, influenced by factors like customer losses, acquisitions, and timing of pharmaceutical price increases.
- 4Operating expenses decreased by 18% for the quarter, primarily due to the absence of substantial goodwill impairment charges recorded in the prior year's comparable period.
- 5The company recorded a $90 million pre-tax credit ($66 million after-tax) in operating expenses related to the extinguishment of a noncurrent liability from the renegotiation of the Tax Receivable Agreement with Change Healthcare shareholders.
- 6McKesson continues to manage significant legal and regulatory challenges, notably ongoing opioid litigation, with opioid-related costs amounting to $34 million ($25 million after-tax) in the quarter.
- 7The company completed the acquisition of Medical Specialties Distributors LLC (MSD) for $784 million in June 2018, integrating it into the Medical-Surgical Solutions segment.